Social security reform: an overview

Recent decades have seen a trend toward longer life expectancy and reduced birth rates across the globe. This is good news -- the pressures created by rapid population growth are being relaxed, and people are more likely to live to old age -- but it creates problems for programs such as Social Security, which are designed to provide for the consumption needs of the elderly. In the United States, the retirement of the baby boom generation will result in a decrease in the number of workers per Social Security beneficiary from 3.3 now to 2.2 in the year 2030. The decrease in the ratio of workers to beneficiaries will necessitate changes in our Social Security program. The fiscal problems faced by Social Security are just one component of the more general problem faced by society: How do we provide for the consumption needs of an increasingly aged population?> Policy decisions made in the next few years will have a large impact on the economic well-being of both future retirees and workers. Social Security reform may cause changes in national saving, labor markets, and financial markets that affect all members of society. Because of the potential importance of these changes to the economy and to future living standards, the Federal Reserve Bank of Boston devoted its forty-first economic conference, convened in June 1997, to Social Security Reform: Links to Saving, Investment, and Growth. This article reviews the presentations at the conference and the themes that developed from the discussions.